Murrieta challenges state on disputed redevelopment funding

MURRIETA  The city of Murrieta has filed a lawsuit to resolve a dispute with the California Department of Finance over redevelopment loan paybacks and funding for an affordable housing project.

Specifically, the state is questioning $3.1 million in accelerated loan repayments the city received from the now-disbanded Murrieta Redevelopment Agency, and $1.2 million in funding for the Monte Vista apartment complex.

Murrieta Finance Director Joy Canfield said the paybacks came from the agency's low- and moderate-income housing fund.

Last year, Gov. Jerry Brown and the state Legislature abolished local redevelopment agencies in a cost-cutting move to address the state's burgeoning budget deficit.

"Repayment was agreed to way before (redevelopment agencies) were dissolved," Canfield said.

Canfield said the city made the $3,157,419 loan to the redevelopment agency in 2004, "to buy land, basically, for low- and moderate-income housing."

She said the paybacks from the agency's low- and moderate-income housing fund were paid back ahead of schedule in order to minimize interest charges and help clear up other loans on the city's books.

That, according to Assistant City Attorney Jeffrey Morris, is one of the sticking points.

"They're not saying the payments are improper," Morris said. "The state recognizes that this money is appropriately to be paid back. Part of the problem is they object to the advancement."

The Monte Vista development is an affordable housing complex at Jefferson Avenue and Juniper Street. The dispute with the state has to do with the funding for the second phase of the project, on which construction began last February.

The city listed an incorrect funding source for the Monte Vista project on a payment schedule filed with the state. Morris said he expected to be able to work that out in the next couple of months.

"That will be reconciled in March," Morris said. "That should have been identified as low-moderate income housing, and it was identified from a different source."

Morris said the city filed a suit against the state Department of Finance over the matter on Dec. 20. He said Murrieta isn't alone, and other cities across the state have filed suits dealing with the fallout from the abolition of redevelopment agencies.

Temecula City Attorney Peter Thorson announced at a council meeting last month that his department had been authorized to pursue legal action regarding approximately $4 million that had been committed to developers, which the Department of Finance was questioning.

"There have been a variety of other cities across the state who have had to do this," Morris said.